MORTGAGE INSURANCE - PMI

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MORTGAGE INSURANCE - PMI

88. WHAT IS MORTGAGE INSURANCE?

Mortgage insurance is a policy that protects lenders against some or
most of the losses that result from defaults on home mortgages. It's required
primarily for borrowers making a down payment of less than 20%.

89. HOW DOES MORTGAGE INSURANCE WORK? IS IT LIKE HOME OR AUTO INSURANCE?

Like home or auto insurance, mortgage insurance requires payment of a
premium, is for protection against loss, and is used in the event of an
emergency. If a borrower can't repay an insured mortgage loan as agreed,
the lender may foreclose on the property and file a claim with the mortgage
insurer for some or most of the total losses.

90. DO I NEED MORTGAGE INSURANCE? HOW DO I GET IT?

You need mortgage insurance only if you plan to make a down payment of
less than 20% of the purchase price of the home. The FHA offers several
loan programs that may meet your needs. Ask your lender for details.

91. HOW CAN I RECEIVE A DISCOUNT ON THE FHA INITIAL MORTGAGE INSURANCE
PREMIUM?

Ask your real estate agent or lender for information on the HELP program
from the FHA.

HELP - Homebuyer Education Learning Program - is structured to help people
like you begin the homebuying process. It covers such topics as budgeting,
finding a home, getting a loan, and home maintenance. In most cases, completion
of this program may entitle you to a reduction in the initial FHA mortgage
insurance premium from 2.25% to 1.75% of the purchase price of your new
home.

92. WHAT IS PMI?

PMI stands for Private Mortgage Insurance or Insurer. These are privately-owned
companies that provide mortgage insurance. They offer both standard and
special affordable programs for borrowers. These companies provide guidelines
to lenders that detail the types of loans they will insure. Lenders use
these guidelines to determine borrower eligibility. PMI's usually have
stricter qualifying ratios and larger down payment requirements than the
FHA, but their premiums are often lower and they insure loans that exceed
the FHA limit.